Measure is unceasing

Impact markets as a mechanism for not loosing your edge

Here is a story I like about how to use impact markets to produce value:

The reverse variant is a normal prediction market:

So in this story, you create these impact markets and prediction markets because you appreciate having early indicators that something is not a good idea, and you don’t want to throw good money after that. You also anticipate being more right if you give the market an incentive to prove you wrong. In this story, you also don’t want to lose money, so to keep your edge, you punish yourself for being wrong, and in particular you don’t mind giving your money to people who have better models of the future than you do, because, for instance, you could choose to only bet against people you think are altruistic.

A variant of this that I also like is:

In that story, you make this bet because you think that replacing yourself with a better alternative would be a positive.

Contrast this with the idea of impact markets which I’ve seen in the water supply, which is something like “impact certificates are like NFTs, and people will want to have them”. I don’t like that story, because it’s missing a lot of steps, and purchasers of impact certificates are taking some very fuzzy risks that people will want to buy the impact-NFTs.

Some notes: